Types of Business Structures
Here, we’ve organized the types of business structures and requirements for starting a business in Charlottesville. When in doubt, speak with an accounting professional to review your options, as the structure you choose will affect your income taxes. To learn more about licensing requirements for the City of Charlottesville and its surrounding counties, contact Central Virginia Partnership for Economic Development.
A business owned and operated by an individual. Individuals must fill out a simple form to register the business with the local government and run a search to ensure their company’s name isn’t being used by another company in their jurisdiction. A small fee is usually required for this service.
An enterprise owned and operated by two or more people and can be created in person or in writing. Each partner is liable for the whole business.
A business owned and operated by two or more people. There are two types of partners: General Partners and Limited Partners. Each Limited Partner in a limited partnership is only liable to the extent of his or her individual investment. Limited Partners have no say in the day-to-day operations of the company; the General Partners manage the company.
A corporate form (taxed like a C Corp or an S Corp) that has a higher level of transparency, accountability and purpose. A benefit corporation has protection and permission to consider its impact on all stakeholders, not just shareholder; available in 31 states in the U.S.
A legal entity that is owned by its shareholders and taxed as a separate legal entity, meaning the corporation pays taxes on its profits. Forming a corporation requires filing Articles of Incorporation with the State Corporation Commission and paying filing fees along with other initial fees, such as legal fees to organize the business.
A standard corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders. Shareholders report their income and losses on their personal tax returns, allowing S corporations to avoid double taxation on corporate income. Like a C Corporation, it has the same filing requirements and formal rules to organizing the business.
Limited Liability Company
A structure that provides liability protection for its owners and a tax structure like a partnership. The LLC owners may choose to operate the LLC like a corporation, and elect managers to run it, or they may choose to operate like a partnership and manage the company themselves. Articles of organization must be prepared and filed in addition to paying initial fees.